KKR Private Equity Investors and KKR have entered into a revised purchase and sale agreement to combine the businesses of KPE and KKR.
KKR Private Equity Investors and KKR have entered into a revised purchase and sale agreement to combine the businesses of KPE and KKR.
Under the agreement, KPE would receive interests representing 30 per cent of the outstanding equity in the combined business and the balance of the equity would be owned by KKR’s existing owners and employees.
The amended and restated purchase and sale agreement was unanimously approved by the board of directors of KPE’s general partner, acting upon the unanimous recommendation of the three directors of KPE’s general partner who are independent of both KPE and KKR under the standards of the New York Stock Exchange.
The independent directors of KPE issued the following statement related to the transaction: ‘In our role as independent directors we have unanimously recommended that the KPE board approve this transaction. Through this transaction, KPE unitholders will gain direct access to all of KKR’s businesses and resources, thereby improving the long-term prospects of their investments.’
Under the agreement, KKR will acquire all of the assets and all of the liabilities of KPE, and, in exchange, KPE will receive equity in the combined business. KPE unitholders’ holdings of KPE units would not change as a result of the business combination.
The transaction does not involve the payment of any cash consideration or involve an offering of any newly issued securities to the public; KKR executives are not selling any interests in the transaction. KPE would retain its listing on the Euronext Amsterdam and the KPE units will continue to be subject to existing restrictions on ownership and transfer.
In addition, after a certain period, each of KPE and KKR will have the ability to seek a listing of the combined business in the US following the completion of the transaction.
While not legally required, KKR and KPE have agreed that the consummation of the transaction be conditioned upon, among other things, the consent of KPE unitholders representing a majority of the KPE units for which a properly completed consent form is properly submitted (excluding KPE units whose consent rights are controlled by KKR or its affiliates). As previously announced, holders of approximately 44 per cent of KPE’s outstanding units have stated that they would consent to a revised transaction on the terms set forth above.
The record date for determining the KPE unitholders entitled to receive notice of, and to consent to, the transaction is the close of business on 23 July 2009. For purposes of determining KPE unitholders as of the record date, only transactions in KPE units that have been settled as of the record date will be taken into account. The solicitation of consents from KPE unitholders is anticipated to commence on 24 July or as soon as practicable thereafter.
Henry R. Kravis and George R. Roberts, co-founders of KKR, said: ‘We are thrilled to be taking this next step in KKR’s evolution. Our new unitholders will participate in the financial performance of all of KKR’s businesses and benefit as we grow our asset management efforts around the world. At the same time, we will own an even greater share of our own investments, further aligning our interests with those of our investors. We believe the combined business will be well positioned to take advantage of the dynamic and exciting opportunities in asset management and financial services. We appreciate the support and trust of our new unitholders and the Board and look forward to continuing our partnership.’
KPE expects that its net asset value as of 30 June 2009 on a preliminary basis will be approximately USD3.0bn, or between approximately USD14.55 and USD14.75 per unit, and will issue its financial report for the six months ended 30 June on or before 30 August. KKR expects its assets under management as of 30 June to be approximately USD50.8bn and that its economic net income and fee related earnings for the three months ended 30 June to be between approximately USD345m and USD370m and between approximately USD45m and USD55m, respectively.
If the consent of a majority of the KPE unitholders is obtained and the other conditions precedent to the transaction are satisfied or waived during the third quarter, the transaction is expected to be consummated on 1 October 2009.
Citi is acting as sole financial adviser to KPE. Lazard is acting as financial adviser to the independent directors, and Bredin Prat and Cravath Swaine & Moore are acting as lead legal counsels to KPE and the independent directors.
Goldman Sachs and Morgan Stanley are acting as financial advisers to KKR and Simpson Thacher & Bartlett is acting as lead legal counsel to KKR.
